Blog on the Run: Reloaded

Friday, August 21, 2009 8:22 pm

Phase 2

Filed under: We're so screwed — Lex @ 8:22 pm
Tags: ,

When they came for the banks that were sinking under the weight of toxic loans, I did nothing, for I was not a bank sinking under the weight of a toxic loan, I was a bank that had bought a bunch of mortgage-backed securities and other banks’ loans.

Problem is, now they’re coming for me.

Friday, June 26, 2009 8:05 pm

Selling bull manure as Belgian chocolate

See, the investment bankers’ problem isn’t that they actually blew the economy all to hell, ruined a ton of people’s retirement or college savings and threw millions out of work. No, their problem is that there has been “populist overreaction”:

Wall Street’s largest trade group has started a campaign to counter the “populist” backlash against bankers, enlisting two former aides to Treasury Secretary Henry Paulson to spearhead the effort.

In memos of confidential meetings with top financial executives, the Securities Industry and Financial Markets Association said it began this month the “execution phase” of the operation, which pledges to “embrace change” and accountability. The plan targets policy makers and the media in New York, London, Washington and Brussels and calls for a “city-by-city, grass roots” approach.

The securities industry “must be perceived as part of the solution, which will allow it to better defend against populist overreaction,” the documents, prepared for a June 17 meeting of SIFMA’s board, said.

The board meeting minutes and staff-written papers, obtained by Bloomberg News, outline the program crafted by polling, lobbying and public relations companies paid at least $85,000 a month. The memos provide a glimpse, in often candid language, into how Wall Street is grappling with its pariah status.

“It is imperative that in this historic period of reform, the industry be recognized as playing a positive role in seeking change and providing solutions to the problems we face,” one of the documents said. “There is currently widespread skepticism about the industry’s commitment to this needed change.”

“There is currently widespread skepticism.” Gee. I can’t imagine why that might be.

But wait! There’s more! (With these cheesemunches, there’s always more.) The guy who’s going to be leading this effort? Doesn’t exactly have a record of competence where the public’s welfare is concerned: “I’m not sure anyone in history has ever helped destroy a brand more thoroughly …”

Those smiles you see belong to lawyers who now understand that banker jokes are going to supersede lawyer jokes for a long time to come.

Wednesday, June 24, 2009 8:24 pm

The same people who blew up the economy want us to take their advice on economic reform

Filed under: I want my money back. — Lex @ 8:24 pm
Tags: , ,

… for which I have six words: not just no, but hell, no:

There are an array of reports today outlining the steps that the banking and financial services industries are taking to gum up various aspects of the plan to beef up Wall Street regulation.

There’s a new industry group — the Financial Instruments Reporting and Convergence Alliance (FIRCA) — fighting an accounting rule change meant “to end a practice that contributed to the risky lending that set off the financial crisis.” Hedge funds, organized into the Managed Funds Association, are mobilizing “money and power to fend off tougher oversight, higher taxes and much greater transparency.”

And of course, banks are continuing to raise a stink about the Obama administration’s plan to create a new consumer protection agency. All of which makes this report from the Research Department at the International Monetary Fund (IMF) (via The Stash) extremely timely.

The paper shows that the financial firms that did the most lobbying from 1998 to 2006 also had lower lending standards, a greater tendency to securitize, a larger presence in areas that are suffering the most from loan delinquencies, and ultimately lost the most money during the financial implosion. The researchers concluded that financial sector lobbying of this sort poses a threat to economic stability and increases systemic risk:

[The results] tend to support a theory of “moral hazard” whereby financial intermediaries lobby to obtain private benefits, making loans under less stringent terms not because they have better capacity to evaluate risks associated with the loans, but because they expect short term gains from these loans during the boom phase, and to be bailed out when losses amount during a financial crisis. These results…provide indirect evidence that lobbying might have the potential to threaten financial stability and contribute to systemic risk.

Of course, no one could have possibly seen that coming.

Monday, June 1, 2009 6:21 am

Accountability and its discontents utter nonexistence

Matt Taibbi thinks more, not less, populism might be a healthy thing:

… there has been almost nothing in the way of punishment of the major figures responsible for this [economic] crisis.  If there were a real correlation between public anger and government policy, we’d have seen at least something in that area. Maybe there wouldn’t have been public floggings, but there would have been some serious frog-marching of unscrupulous [jerks] to prison. And this isn’t about vengeance, it’s about policy: if the “consequence” for blowing a $4 trillion hole in the economy is seeing masses of government officials line up to hurl billions of taxpayer dollars at you, that doesn’t provide much of an incentive to fix your behavior. This is one area where there should have been a seamless melding of public outrage and government policy: we should have swooped in, rounded up 200 of the most guilty executives, hauled them before congress in a public trial, and packed them all off to a Supermax in Florence, Colorado to do real time with murderers, rapists and terrorists.

Q: What do you call rounding up 200 of the most guilty executives, hauling them before Congress in a public trial, and packing them all off to the Supermax in Florence, Colorado, to do real time with murderers, rapists and terrorists?

A: A good start.

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